In all the second-guessing and navel gazing over the Faraday Future flop, no one is bringing up the real reason that the deal should never have been made in the first place.In all the second-guessing and navel gazing over the Faraday Future flop, no one is bringing up the real reason that the deal should never have been made in the first place.
Yes, it was an ill-conceived idea for gullible Nevada lawmakers in a special session in 2015 on blind faith alone to agree to dole out $215 million in tax abatements and credits to entice Faraday Future to build an electric car factory at the Apex industrial complex in North Las Vegas, though at the time it did not even have a prototype vehicle. The deal, struck by the Governor’s Office of Economic Development, also promised to spend $120 million on infrastructure improvements at the site — water, rail and widening of Interstate 15.
Faraday promised to build a $1 billion manufacturing facility, create 4,500 jobs and start producing cars as early as 2016.
After visiting China in 2016 state Treasurer Dan Schwartz, long a critic of the Faraday largesse by the state, told the press, “We’re increasingly more concerned than we were before that this is just a big Ponzi scheme.”
He and the handful of other naysayers have been proven right. Faraday has pulled the plug, tucked tail and run off.
But it wasn’t just naiveté or poor negotiating skills or poor judgment that made this a bad deal. It was blatant and arrogant flouting of the state Constitution. In fact, it was a double flout.
Nevada’s Constitution has a Gift Clause, which states, “The State shall not donate or loan money, or its credit, subscribe to or be, interested in the Stock of any company, association, or corporation, except corporations formed for educational or charitable purposes.”
Self-styled economic development advocates have tried three times to amend the Constitution and remove the Gift Clause. The voters rejected those attempts all three times — in 1992, 1996 and again in 2000 by wide majorities.
The state Supreme Court has said that when the state provides something to a private entity without getting adequate compensation for the value, that is a gift and thus a violation of the Constitution.
Nevada’s high court has cited an Arizona Supreme Court ruling on that state’s nearly identical Gift Clause. The Arizona court said its Gift Clause “represents the reaction of public opinion to the orgies of extravagant dissipation of public funds by counties, townships, cities, and towns in aid of the construction of railways, canals, and other like undertakings during the half century preceding 1880, and it was designed primarily to prevent the use of public funds raised by general taxation in aid of enterprises apparently devoted to quasi public purposes, but actually engaged in private business.”
Then there is the section of the Nevada Constitution that clearly states, “The Legislature shall provide by law for a uniform and equal rate of assessment and taxation …” It is not uniform or equal if a select few get breaks while others don’t.
Despite these clearly worded prohibitions the state doled out $1.3 billion in tax breaks to Tesla Motors to build a battery factory near Sparks. The projections on capital investment and number of jobs to be created have fallen far short. All it would take to make the whole deal go bust is a technological breakthrough that makes lithium ion batteries obsolete.
That $750 million to build a Las Vegas stadium for the Oakland Raiders football team on a site with woefully inadequate parking spaces still could come up a piker.
But none of them should ever have been allowed in the first place and none like them should ever be allowed again, if officials and lawmakers would abide by the Constitution. — TM